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Math toso Mortgage Project

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ln thrs ]rj t) jc-c1 u'e n'ill examitre a home loan or illortgage' z\ssume tirat ytttt have fbrtlld

a honle

lor. srrlt anci have agreecl to a purchase price of 5201,000.

are going to make a 10o,/o dorvn paymettt on the house. Detennine the
-rntrLlltt of I'oLu'dotvtt pa-vment and the balance to l'tttance1)orr n Pat'ment:

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Mortgage

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Part I: 30 )'ear Mortqase

]Iopthlr, Payment: Calculate the monthly'pa.ymerit for a 30 ,vear loan (rourldir"ig up to tl-re
nei'u.esr cent) by usirrg the tbllorving forrnula. Shorv your rvork. IPM I' is the rnonthl-v loan
and l'is
ir:r\.ilcnt. P is the rnofigage amoLrrlt. r is the annual perceltt rate for the loan in det:intttl.
rate
of
itlterest
amrual
an
ltse
r,ear
loan
tlte nlunberol1.c:ars to pa1'off the loan.] For the 30
-/ r \ ll*! (')a<0'

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r (;)
r- (1 + r?)
,

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Sho*, rvork here

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144.

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ffiv+i+J:r)-:ra

7+1,1x\ls'17

l-,zzlro+fi\

4!a
----)l++qsrol lil a

i\4ontirl1,Pa-yurent for a 30 vear mortsage

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3g

Note [hat this ltonthl1,pa1,mgn1 cL)\rers oll1.thc inter-est and the pritlc-i1la1 on the loan. It does not
cover any insurance or laxes on the ploperty.
Arnorliz:ttion Schedulc. In order-10 slutx-llarize all the inlirrn'ratiort re garcling the amortizatiorl of
1loa1, copstrltct a scheclule that keeps track of the pavrnet'it nrtmber. the principal paid- the
inlelest- aud the r-urpa-i,-1ba,lzince A spr-eaclsheet llrogranl is a-n t-:-r-.el1c:nl l'lcrl tir clet't:lop atl

:l ;:l;(:ll

ar-]rortization schedule. We can use a h'ee alnoltizrtrr,n sl',r-eadsheel on tire rveb.

The rveb adclress is. httl-r:/ir+uar,.blctrvhisscl.neilamrriii;:ation,iamorlize.lrtinl. Ertter the ;rmount
of thc lo:rn- i.e. tite selling price rninus the do*,n pa\,rlrent. the intercst rate, and the appropliate
number of 1,ear-s. Check the box to shorv the schedr.rle.

tl,- t
.\lrlortizationSchedu]errrorrth1.vpaymentfora30yeaImortgag4{,1r>:
(Note: i1'tl-ris is ntore than 2 or j cents dilltrent from yt-rur calculation. check vour nut-nbers!)
iPf $x2

Total interest paid over 30 )'ears

rotal amount paid

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Notice that the amount of the payrnent that goes tor,r,ards the principal and the amount that goes
towards the interest are not constant. What do you observe about each of these values?

of loq1
each n^of,{h\y ?n,!mn+ +hq Prllt(ltst aMoq*t n^o^[h
ery\
deuftAses, As-fh^{ 'p.,'n..f^\ amoqn+ detreateg
tshe pntncrf c] '
\';^]'t
plsnuay
/norq s* yc;rrrf
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Number of first payment rvhen more of payment goes to\\,ard principal than intere

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.\s alread1,'mentioned, these pa.vrnents are for principai and interest or-riv. You rvill also have
monthly pa1'nrents fcrr home insurance and propert)' taxes. In addition. it is helpful to have
morley left over for those little luxuries lilie electricity'. runnir-rg \\iater, and fbod. As a rvise home
owner. .vou decide that 1,our monthl-v principal and interest pal,ment should not exceed 35on of
r,our montirly talie-home pa)'. What minimum monthly take-home pa1' shouid -vou have in otdet
to meet tiris goal? Show your r,vork lbr rnaking this calculation
Shorv rvork here

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Mirrirrrurrr nrorrrhly rake home pa),-

fial **,lE

flr.ynu*t

qross lla)l
It is also important to note that your llet or take-honre pa) (alier taxes) is less than Yout
(befbretaxei). Assumingthatl,onrletpay,'is7396o1'rourqrosspa\'.rvhatmitritllLrltluross
arutual saiat'\, u,ill ,vou need to malie to liave titc- ntorttiti\' tlr-t salar)' stiited above'? Shorv 1'our
rvork lbr making this calculation.

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Shovv rvork here.

Y(,1)=27

b(:7 ( :-7

xh/) =?7u,71

: jJ16,ol tz

,-! 3

kt+?o,\L

-,a3

U
trIinimum gross annual salary'

Part

s*bo,l,z

iI: Selling the House

-fhe econom.v
Let's suppose that a{ler living in the house for l0 years- You want to seli.
.xpe.iences ups and dorvns. but in general the value of real estate increases over time. To
calculate the value of an investment such as real estate- \\ie Llse continuottsly compounded
inlerest.
Find the value of the l-iome 10 years atier purchase assttming a contin
Use the full purchase price as the principal. Shou'your u'orl<'
Shorv work here.

q,l
ao\c6o( \*,r4)'o = ?iqlse
/
7'q1 g *['1

l;

+olooofQ'u) =

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value of horne

10 years after purch

^r"ilp^q185 'Vb

Assurnin-e that
,vour gains

y,"ou

following information to calcrilate

ol losse.s:

Selling price of
a

can sell the house for this amount. tise the

'oru

house

oliginal dou,n pa-Yment

& eqq

8*b'1 6 L
C

2 C,lOO, *

Nfortgage paid over the ten vears

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The priricipal balance on your loa, atie' ten -vears

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Do you gail or lose mone,v over the 10 years? Horv much? Show your amounts and summarize
your results:

otpo -llbzoz-l+-/ot5- = l(syl '7Lfi2,,q.6*'-Jb

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f,orrl.
the
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anddo\^,npayment.vn,eq,illirrr,estigateai5yearmor1gage.L

Monthly Payment: Calculate the monthl,v payment for a 15 year loan (rounding up to the
nearest cent) by using the follor,ving formula. Shor.v your rvork! [P]\4T is the monthly loan

payment, P is the mortgage *rorri- r is the annual percent rate for the loan in decimal' and
the number of years to puy off the loan.] For the 15 year loan use an annual interest rate of
4.73sYo.

PMT :

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t - ( l,ooiq+st ,r)'uo

113.w[u5
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1{j,*#25
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Iv{ontl-ily Payment for a i 5 year tnortgage

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